Apple makes most of its money by selling gadgets with hefty margins, like the iPhone or Mac computers.
But increasingly, the company and its investors want to make money by selling online services to Apple’s existing base of iPhone users.
Apple’s services business generated $US26 billion in sales in 2016. A new projection from Credit Suisse analysts led by Kulbinder Garchasee sees it growing to $US52 billion by 2020.
“Services are becoming a larger part of our business, and we expect the revenues to be the size of a Fortune 100 company this year,” Apple CEO Tim Cook said during the company’s last earnings call. Apple CFO Luca Maestri said there’s an internal goal to double revenue from services over the next four years.
Here’s a chart that shows Apple’s Service business growth since 2000:
Some of the online services that Apple sells are subscriptions, like iCloud storage or Apple Music. But the majority of revenue that Apple pulls in from online services stems from the cut it takes when people pay for apps on its App Store platform.
Here’s an estimate of the specific products and services that Credit Suisse believes makes up that line item:
Credit Suisse gave Apple stock a price target of $US170 and a rating of “outperform.”
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